The fall of Tech Nation and what next?
Tech Nation is no more. The decision to withdraw Tech Nation’s funding is undoubtedly controversial. However, hopes remain high that the UK will continue to grow as a global tech hub.
Tech Nation has helped shape the trajectory and success of UK tech. From the number one digital economy in Europe to being valued at one trillion dollars (£795.2bn) – 16x growth in 10 years – with over 20 locations home to one tech unicorn or more, the UK is brimming with potential. Additionally, a third of tech unicorns ever created in UK history have passed through one of Tech Nations’ growth programmes. Why then, is Tech Nation un-fundable?
A DSIT spokesperson tells us: “We always review grant arrangements at the end of a funding period, and decided to make the Digital Growth Grant competitive to ensure it remains tailored to the UK’s growing tech sector. This brings it into line with the majority of government grants.”
Companies and entrepreneurs alike are already lamenting the loss. Damian Fairbrother Jones, Chief Operating Officer, AeroCloud, a start-up recognised as a Rising Star by Tech Nation said: “Pulling the plug on Tech Nation will leave a significant gap in the venture capital ecosystem. As a big corporate, it will be hard for Barclays to replicate the ‘insider’ feel that Tech Nation created and the way in which it provides practical resources and approaches.”
Tech Nation’s loss is Barclays’ gain.
Combined with Eagle Labs’ existing activity, the £12m Digital Growth Grant will support approximately 22,000 businesses over the next two years enabling growth across the UK tech sector. The Digital Growth Grant doesn’t provide seed funding or grants for start-ups, so there isn’t an immediate impact on how funding will happen. Instead, it will improve businesses’ abilities to attract investment and talent, through enhancing access to tailored advice and support.
Hannah Bernard, Head of Business Banking, Barclays outlines what unique benefits Barclays can bring commenting:
“By leveraging the depth and breadth of our wider banking connections, supporting our communities and enabling entrepreneurs to develop the skills and confidence they need to succeed, we are helping all businesses to grow.
This is the ethos that has been driving Barclays Eagle Labs since its inception in 2015 and drives every single colleague in our broader Business Banking team.”
The DSIT spokesperson goes on to outline the reasons for Barclays success, adding: “Barclays Eagle Labs was successful because their application represented the best value for taxpayers’ money, will benefit the most startups and scale-ups over the next two years, and was scored highest by an independent panel.”
Is tech political?
Tech is not necessarily political but it’s difficult to know the motive behind the pulled funding. Rhys Merrett, Head of Technology, The PHA Group, thinks its all about timing.
He said: “If we think about Tech Nation’s evolution, it came at the launchpad moment for UK startups and scale-ups. There was no shortage of investment rounds, and even with the initial Brexit headwinds, startups were successfully scaling up into unicorns.”
The landscape is different now. With economic volatility spurred on by inflation and high interest rates, those backing start-ups are taking a measured approach, emphasising due diligence, and waiting to see how the tech start-up market performs.
“The government’s decision could reflect this, particularly as it looks to address growing public debt. Less so a political decision, rather one driven by fiscal concerns,” he adds.
It is sad to be shutting down an organisation that has had such an impact and has been involved in the creation of so many of the UK’s tech successes. However, the sector has been fraught with political instability around what the country’s policy is on issues like AI and digital competition. While EU lawmakers have agreed on many of the guidelines, the UK is still talking about the regulations, with no conclusion in sight.
“The recent IMF forecasts show the UK needs to do something pretty major to improve our economic prospects. The Innovation economy should be at the centre of this – but the signs from the government are anything but supportive – having tightened the R&D tax credit scheme and now redirected funds from one of the tech scene’s big success stories,” says Richard Dana, Founder and CEO of tech-focused mortgage broker, Tembo.
Silicon Valley: the second coming?
The government recently reiterated its desire to become the “next Silicon Valley”. Withdrawing funding from Tech Nation shows its approach to UK start-up policy takes one step forward and two steps back. If the UK government wishes to turn the UK into a new Silicon Valley, the industry needs grassroots support.
Luisa Alemany, Associate Professor, Management Practice, London Business School, acknowledges the amazing job Tech Nation did, but fears for start-ups now that funding has been pulled.
She commented: “Tech Nation has played a key role in developing the UK (and also European) tech ecosystem. The dismissal by the Government was a negative signal to the entrepreneurial and venture ecosystem.”
According to Ekaterina Almasque, General Partner at OpenOcean, the UK tech sector needs timelines measured in decades, targeted incentives and funding from government to ensure continued progress.
“Simply branding plans with ‘Silicon’ is not sufficient. We must ensure that we put in place the correct processes to bring talented founders with innovative software ideas all the way from ideas on a whiteboard to stock listings in Piccadilly Square,” she adds.
Going on recent data, Silicon Valley comparisons are likely a pipedream. PE/VC funding collapse for the tech sector sees London’s dominance slipping in the 2023 UK Top 100 fastest-growing companies ranking. The number of tech companies in the Growth Index 2023 has dropped by almost a third (32%) down from 22 last year to 15 this year.
With the recent demise of Tech Nation, it will be interesting to see how tech features in the Growth Index 2024.
Founders Forum Group (FFG) has formally acquired Tech Nation in a bid to continue the startup support network’s mission to empower the UK’s tech sector. This injects a dose of confidence back into the startups industry.
“Tech Nation’s acquisition by the FF Group is a timely lifeline which looks set to breathe new life into the previous programmes and initiatives. There is significant potential here, particularly in regional hubs outside of the capital, and a long-term vision that goes beyond the current economic challenges to recognise the future, untapped potential of the UK’s tech sector”, advises Merrett.
The government needs to support the UKs transformation into a technology superpower. The Budget promised funding, including £3.5bn for science and technology, including £100m for innovation accelerators.
For the UK to maintain its position and continue to attract tech firms, it needs to create and foster the optimal environment for companies to come and operate here, warns Yoko Spirig, Co-Founder & CEO at Ledgy
Carolyn Dawson OBE, FFG CEO reveals how the FFG plan on building on a remarkable decade of growth: “We plan to relaunch a number of Tech Nation programmes and reports on the UK tech sector as Founders Forum Group expands its existing portfolio of events and services tailored to entrepreneurs. We are also keen to collaborate with organisations who share entrepreneurial empowerment as a key objective and believe there is strength in collaborating to support the UK tech industry.”
Pulling the plug on Tech Nation will leave a significant gap in the venture capital ecosystem. As a big corporate, it will be hard for Barclays to replicate the ‘insider’ feel that Tech Nation created.